1. An investment project has annual cash inflows of $5,800, $6,900, $7,700, and $9,000, and a discount rate of 14 percent.
Required:
What is the discounted payback period for these cash flows if the initial cost is $9,000? (Do not round your intermediate calculations.)
a. 1.24 years
b. 1.74 years
c. 2.49 years
d. 3.48 years
e. 0.74 years
2. The Bell Weather Co. is a new firm in a rapidly growing industry. The company is planning on increasing its annual dividend by 18 percent a year for the next 4 years and then decreasing the growth rate to 3 percent per year. The company just paid its annual dividend in the amount of $2.50 per share. What is the current value of one share of this stock if the required rate of return is 8.00 percent?
a. $99.85
b. $88.43
c. $85.93
d. $73.39
e. $102.35